WHEREAS: Many Hershey’s products such as Kit Kat and Baking Pieces contain palm oil. As a popular branded food company, Hershey faces significant reputational and supply chain risk by sourcing palm oil that is not sustainably produced.

The Roundtable on Sustainable Palm Oil (RSPO) was formed in 2004 to promote the growth and use of sustainable palm oil products. Mars, Nestle, and Unilever have made public commitments to source only RSPO-certified palm oil by 2015. Several large U.S. companies cancelled contracts with Indonesia’s biggest and most controversial palm oil producer Sinar Mas following reports that the company was violating Indonesian law and the Principles and Criteria of the RSPO.

Hershey’s has a policy of sourcing palm oil only from RSPO members. However, RSPO members are not required to sell certified sustainable palm oil.

Palm oil is found in 50% of all consumer goods including foods and cosmetics. The demand for palm oil in the United States has tripled in the last 5 years.

The production of palm oil is a significant source of greenhouse gas (GHG) emissions due to deforestation, degradation and conversion of high-carbon peatland, and fires set for establishing plantations.

Tropical deforestation is responsible for 15-20% of annual global GHG emissions – more than the emissions from the entire U.S. transportation sector. Due to deforestation, Indonesia is now the 3rd largest emitter of GHGs.

Approximately 85% of palm oil is grown in Indonesia and Malaysia on industrial plantations that have severe impacts on the environment, local communities, and the climate. 98% of palm oil imported into the United States originates in Indonesia and Malaysia.

Over 20 million indigenous people and local populations depend directly on forests for their livelihoods. These tropical rainforests also contain important biodiversity, and provide critical habitat to numerous highly endangered species.

Loss of the ecosystem services provided by forests is estimated to cost the global economy $2 - $5 trillion annually.

Regulatory initiatives and incentives to combat climate change and reduce GHG emissions have proliferated in recent years. At the international level, countries are collaborating on policies relating to deforestation. Indonesia has committed to reduce its emissions by 26% by 2020.

The environmental and social impacts of palm oil make this product highly controversial. The World Bank and its private lending arm, the International Finance Corporation, have announced a moratorium on new palm oil investments until the Bank develops a comprehensive strategy on palm oil development.

RESOLVED: Shareholders request that the board of directors adopt and begin to implement a comprehensive procurement policy by 2012 for sourcing 100% certified sustainable palm oil.

SUPPORTING STATEMENT: We recommend the policy include:

segregating and tracing RSPO-certified (or a more stringent certification) palm oil at all stages of the supply chain by 2015;

the certification program should include a moratorium on deforestation from palm oil plantation expansion and prohibit sourcing from High Conservation Value Forests or peat lands; our company should establish clear targets and timetables for implementing this policy.